T.S. Grewal Class 12 Chapter 1 Q.86 - Accounting for Partnership Firm Fundamentals

Question 86

A and B are in partnership sharing profits and losses in the ratio of 3 : 2. They admit C, their Manager, as a partner with effect from 1st April, 2024, for a 1/4th share of profits. C, while a Manager, was in receipt of a salary of ₹27,000 p.a. and a commission of 10% of the net profits after charging such salary and commission. In terms of the Partnership Deed, any excess amount which C is entitled to receive as a partner over the amount which would have been due to him as a Manager is to be personally borne by A out of his share of profit. Profit for the year ended 31st March, 2025 amounted to ₹2,25,000. Prepare the Profit & Loss Appropriation Account.

Solution

Profit & Loss Appropriation Account (for the year ended 31st March, 2025)

Particulars (Dr.)	₹	Particulars (Cr.)	₹
To Profit transferred to Capital A/cs:		By Profit & Loss A/c (Net Profit)	2,25,000
A	96,750
B	72,000
C	56,250
Total	2,25,000	Total	2,25,000

Working Notes: C’s remuneration as Manager = salary ₹27,000 + commission [(₹2,25,000 – ₹27,000) × 10/110 = ₹18,000] = ₹45,000. C’s share as a partner = ₹2,25,000 × 1/4 = ₹56,250. Excess (₹56,250 – ₹45,000 = ₹11,250) is borne by A. Remaining profit ₹1,80,000 in 3 : 2 → A ₹1,08,000, B ₹72,000; A’s final share = ₹1,08,000 – ₹11,250 = ₹96,750.